Correlation Between Event Hospitality and Hotel Property

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Can any of the company-specific risk be diversified away by investing in both Event Hospitality and Hotel Property at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Event Hospitality and Hotel Property into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Event Hospitality and and Hotel Property Investments, you can compare the effects of market volatilities on Event Hospitality and Hotel Property and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Event Hospitality with a short position of Hotel Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Event Hospitality and Hotel Property.

Diversification Opportunities for Event Hospitality and Hotel Property

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Event and Hotel is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Event Hospitality and and Hotel Property Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Property Inves and Event Hospitality is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Event Hospitality and are associated (or correlated) with Hotel Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Property Inves has no effect on the direction of Event Hospitality i.e., Event Hospitality and Hotel Property go up and down completely randomly.

Pair Corralation between Event Hospitality and Hotel Property

Assuming the 90 days trading horizon Event Hospitality and is expected to generate 1.3 times more return on investment than Hotel Property. However, Event Hospitality is 1.3 times more volatile than Hotel Property Investments. It trades about 0.09 of its potential returns per unit of risk. Hotel Property Investments is currently generating about 0.08 per unit of risk. If you would invest  1,033  in Event Hospitality and on November 2, 2024 and sell it today you would earn a total of  137.00  from holding Event Hospitality and or generate 13.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Event Hospitality and  vs.  Hotel Property Investments

 Performance 
       Timeline  
Event Hospitality 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Event Hospitality and are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Event Hospitality may actually be approaching a critical reversion point that can send shares even higher in March 2025.
Hotel Property Inves 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Hotel Property Investments are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Hotel Property may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Event Hospitality and Hotel Property Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Event Hospitality and Hotel Property

The main advantage of trading using opposite Event Hospitality and Hotel Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Event Hospitality position performs unexpectedly, Hotel Property can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hotel Property will offset losses from the drop in Hotel Property's long position.
The idea behind Event Hospitality and and Hotel Property Investments pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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